The report examined the "burn rate" of dot-coms, or the length of time it takes for a company to exhaust funds before it needs to raise additional cash. It looked at 28 companies listed on the London Stock Exchange and Alternative Investment Market.
Twenty-five of the companies' cash operating expenses exceeded their gross profits, and the average rate to a necessary infusion was only 15 months, according to the research. Ten of the companies had a burn rate of less than 12 months.
This accelerated pace for absorbing capital is a marked weakness for many incipient businesses, according to the report, and is one that has investors scared. Today, high-profile e-tailer Boo.com closed shop after struggling to secure additional investments--the first big failure by an e-commerce company in Europe.
The company, whose site launched only six months ago, raised about $120 million last year from an impressive list of investors, including French entrepreneur Bernard Arnault, chairman of luxury goods maker LVMH. Still, it was unable to draw added investments because of high costs and a shaky business strategy.
The vulnerability is likely to spur consolidation in the Internet industry in the next year, the report said.
"Many of these companies have very little time left in which to start increasing revenue or to raise new cash, and there has been a recent correction in the equity markets, with investors becoming much more selective about which Internet stocks they will back," John Soden, a partner with PricewaterhouseCoopers' business recovery services arm, said in a statement.
Similarly, analysts predict that U.S. Internet companies will start to disappear at an accelerated pace because of the recent stock market malaise and declining interest in e-commerce businesses. Forrester Research said it predicts that the majority of dot-coms will go out of business by 2001, and many others will have to radically revamp their business strategies.
The research makes no clear correlation between the performance of the companies' share prices and their burn rates. It also shows that half of the companies' share prices grew by an average of 840 percent over six months.
Reuters contributed to this report.